What Happened: Moody's Investors Service has lowered its credit rating outlook for India from "stable" to "negative," citing an ongoing slowdown in the country's economy, Reuters reported Nov. 8. Moody's also expects India to breach its fiscal deficit target of 3.3 percent, although it maintained the country's foreign and local currency investment rating at Baa2.
Why It Matters: Moody's decision to lower its outlook for India could hurt the country's investor profile by affecting sovereign bond yields and India's stock market; as it is, the outlook downgrade has already sent the rupee to a three-week low. If India's economic slowdown persists, it could open the door for the opposition Indian National Congress to capitalize and gain seats in state elections in 2020.
Background: Growth in India's economy slowed from 7.2 to 6.8 percent in the last fiscal year ending in March. If New Delhi breaches its budgetary deficit, it could disrupt the government's drive toward fiscal consolidation, which is aimed at lowering its borrowing amount to finance its annual budget.
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